Public sector is haunted by poor productivity tag

Value for taxpayers’ money spent on public services has been a recurring theme in the general election campaign, with the government accused of boosting public sector payrolls without securing a commensurate improvement in public service performance, which implies a fall in productivity. But is such criticism justified?

It is certainly true that the number of people employed in the public sector has risen relatively strongly in recent years -up by 583,000 (11%) between 1998 and the start of 2004 (the latest quarter for which official figures are currently available).

During the same period, private sector employment grew by 4%. Critics say that too many of these new staff are ‘unproductive bureaucrats’, hence the fall in productivity.

However, this claim is exaggerated. A balanced assessment suggests that managers and administrators account for only around one in four of the net increase in public sector jobs since 1998. Frontline professionals account for a similar proportion with the remaining half best described as ‘intermediate staff’, teaching assistants, nursing auxiliaries, care support workers, and so on.

This implies that poor public sector productivity is explained primarily by deficiencies in organisation and management practice rather than ‘too many bureaucrats’ per se. But it is also likely that public sector performance itself is being underestimated.

Public service outputs – for example, the number of hospital treatments in a given year or the number of school pupils passing exams – may not adequately reflect improvement in public service outcomes, such as the impacts on health in society or employability, which are ultimately what matter.

Likewise, output measures might not always identify improvement in the quality of outputs.

And in practical terms for the period since the late 1990s, it may be that the apparent fall in productivity is due to a lag between higher public spending and increased outputs if higher spending has been needed to build public sector capacity.

To investigate these issues, the Office for National Statistics (ONS) launched a review of public sector output and quality figures – headed by eminent economist Sir Tony Atkinson – which published its final report earlier this year.

Atkinson’s central recommendation was for a measurement procedure called ‘triangulation’.

This boils down to supplementing output and input data, with an array of independent evidence, assessment and evaluation to form a triangular performance scorecard.

The ONS is already starting to apply this procedure in the way it measures health and education outputs and will in due course establish a UK centre for the measurement of government activity.

This seems a sensible way forward, although the mix of quantitative and qualitative metrics involved in triangulation will doubtless leave ample scope for future disputes about how productive the public sector really is.

John Philpott is chief economist, Chartered Institute of Personnel and Development